Nova faces liquidation after sale

Nova Corp.’s court-appointed administrators plan to sell 30 of the failed language school chain’s 670 branches to G.communication grp. and liquidate the rest, making tuition refunds very unlikely.

Nagoya-based G.communication, which also runs cram schools and restaurants, said the takeover would happen immediately with an eye to resuming lessons and eventually running as many as 200 of the bankrupt Osaka-based chain’s schools. It reportedly plans to accept paid-up Nova students and offer them classes at a discounted price.

“Our company has been unofficially selected to become a sponsor in order to fund Nova’s operations,” G.communication said in a press release late Tuesday without specifying details of the deal, which was announced before it could be approved by the Osaka District Court.

According to the statement, the schools would be taken over by G.communication’s wholly owned subsidiary, G.education Co., which runs 42 English conversation schools under the EC Inc. brand mainly in Hokkaido. It will initially take over 30 of Nova’s schools but reportedly plans to run about 200 Nova branches under their original brand.

Nova’s court-appointed administrators had been under pressure to find a sponsor quickly to assume some of its previously estimated ¥43.9 billion in debt, including¥4 billion in unpaid salaries.

One of the administrators said a deal had to be made quickly because Nova’s corporate value was plummeting. Under the Corporate Rehabilitation Law, revised in 2003, a failed firm can sell its operations on the basis of brief court permission, even if its reconstruction program has not been approved.

As for the at least ¥4 billion in salaries owed to Nova’s 7,000 employees, including some 4,000 foreign teachers, some of whom haven’t been paid since August, Nova has said it will pay part of the money owed by using government money. But how much each teacher will get and when are causes of concern, said Koji Yamahara of the Osaka-based General Union, which represents some Nova workers.

“The unpaid salaries will come from public funds. But there is a maximum payout limit and it will take at least six months for Nova staff to get even a portion of their back wages,” he said. “Many staff members are now hurting financially. They should receive immediate payment of what they are owed.”

The General Union is warning of further trouble and chaos unless the new sponsor quickly clarifies how it will deal with the unpaid wages.

But the decision to offer a discount to Nova’s students instead of refunds was criticized by the union, which said it will pursue the case in court.

“The decision (by G.communication) not to return any money to Nova’s students is cruel,” Yamahara said. “The union will continue negotiations on this matter with the court and the government.”

One of the administrators said the Nova failure is likely to go down as the one that caused the most financial damage to “the largest number of creditors,” in postwar Japan.

G.communication has agreed to allow Nova’s students to buy the same kind of lessons they were taking at Nova for about 25 percent of what they paid there.

Dennis Tesolat, the General Union’s general secretary, said the details about re-employing Nova teachers also needs to be clarified.

“Both G.communication and Nova’s court-appointed lawyers have said that all of those who want to be re-employed will be. But how are they going to ensure this happens and under what conditions will the teachers be employed? This remains unclear,” Tesolat said.

But Jamie Scarrabelotti, who used to work at a Nova multimedia center in Osaka, said most Nova staff he knows were skeptical about the prospects of finding new employment and getting their wages paid. “We’ll try to get our owed wages, but, frankly, I don’t think many Nova teachers expect to get fully reimbursed,” he said.

On Oct. 26, Nova filed for protection from creditors and completely shut down operations, putting nearly 7,000 employees out of work and leaving nearly 300,000 students in limbo.

In Tokyo, Toby Gummer, a Nova teacher who visited a public job security office, said the bankruptcy announcement should have come earlier.

“They knew they didn’t have money several months ago. They should’ve declared bankruptcy then,” said Gummer, an Aussie who taught English for more than three years for Nova in the Akasaka district.

He said many Nova teachers are in financial difficulty and have started thinking about going back to their home country, including himself.